Verizon's proposed purchase of Yahoo, subject to government approval, was drawing concern from privacy activist groups that have been pushing the FCC to adopt strong broadband privacy rules.
"The FCC should quickly enact its proposed consumer privacy rules for broadband ISPs," said Center for Digital Democracy executive director Jeff Chester. "As broadband network monopolies such as Verizon merge online ad giants, new threats to consumer privacy emerge. That’s why action of FCC Chairman Wheeler’s privacy proposal is required. The Obama Administration and the FCC must ensure that deals like Verizon/Yahoo don’t further erode the little privacy Americans enjoy today when they use digital media."
The deal clearly makes Verizon a more formidable online ad player.
"The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising,” said Lowell McAdam, CEO of Verizon, of the proposed deal.
Brian Wieser, senior research analyst for advertising at Pivotal Research Group, says the deal "firmly entrenches Verizon as the number three seller of digital advertising behind Google and Facebook," with Verizon representing the "the legacy inventory associated with Verizon as an ISP, the legacy AOL inventory, the bulk of Microsoft’s global display inventory and now Yahoo."
The FCC is proposing that ISPs like Verizon require their users to actively agree to sharing their customer data (CPNI) with third parties for marketing and other purposes and would set deadlines for informing customers about any data breach.
Currently Yahoo and other edge providers have no requirements on how they collect and monetize Web surfer data.
"Regulators, including the DOJ and FCC, must prevent Verizon from taking anticompetitive and unfair advantage of its broadband ISP bird’s nest view of what their subscribers and consumers do—online and off," said Chester.
Dallas Harris, tech policy fellow at Public Knowledge, agreed that the deal puts a "fine point" on why the FCC broadband privacy rules are some important. She said she did not see much antitrust concern with the deal, and thought the FCC would not be vetting it.
DOJ and/or the Federal Trade Commission will be vetting the deal for anticompetitive issues. It was not entirely clear at press time whether the FCC would have any role in reviewing the deal--an FCC spokesperson was checking but did not think the commission would be reviewing it. The FCC gets involved when communications licenses change hands, which did not appear to the case since Verizon has the licenses and retains control of them.
Harris said Public Knowledge shares Chester's concerns about the privacy implications of the deal and said agencies should be thinking those implications generally when considering mergers in a Twenty-first century digital media world.
Given that the FCC's privacy rules have been teed up for months, she also suggested the deal indicated that companies are not afraid to "merge or innovate" even in the face of those rules. Harris said she did not think the FCC would have a direct rule in reviewing the merger.
"We expect the DOJ will engage in its customary review process," said a Verizon spokesperson. "The transaction will not involve any FCC licenses, so we do not anticipate FCC review."
"Verizon’s recent buying-spree of AOL and now Yahoo! illustrates that ISPs are rushing to supplement their already robust data collection capabilities to target marketing to their customers with highly personal and comprehensive data," said Eric Null, policy counsel for New America's Open Technology Institute. "As ISPs continue to seek ways to vertically integrate, the FCC must pass broadband privacy rules to give consumers the ability to choose whether they consent to their ISP engaging in such privacy-invasive practices."
Michael Calabrese, dirctor of the Open Technology Institute's Wireless Future Program saw another troubling takeaway.
“The acquisition of Yahoo’s assets is a drain on cash that reinforces the likelihood Verizon will not be a huge bidder in the ongoing incentive auction for TV band spectrum," he said. "Verizon is focusing instead on inexpensive small cell and unlicensed spectrum to densify capacity in high-traffic urban areas and venues."
Think tank TechFreedom suggested the deal and its potential to provide a stronger competitor to Google in online advertising was an argument AGAINST adopting the FCC broadband privacy rules.
"Yahoo’s main benefit for Verizon would be as a platform for advertising revenue, yet the requirement in the proposed privacy rules for customers to opt-in to allow their data to be used for third-party advertising would greatly impede Verizon’s ability to offer more valuable ads," said the group.
“The deal creates a stronger competitor to Google in the advertising and web services markets, and that ultimately benefits consumers,” said Berin Szóka, president and founder of TechFreedom. “Antitrust regulators should approve the deal swiftly; the more time the two companies spend waiting at the altar, the harder it will be for them to catch up with Google and other competitors.”
“The biggest challenge for the combined company is the FCC’s proposed privacy rules,” he said. “The FCC would require Verizon to obtain a separate opt-in from its broadband customers for any Yahoo! service, regardless of how sensitive that data at issue is. That blanket rule will make it a lot harder for Verizon to innovate — not just in advertising, but in other apps and services that it could offer to its customers."